China Faces Economic Slowdown Amidst COVID Lockdowns

China faces an economic slowdown attributed by many observers to its draconian ‘zero-COVID’ lockdown policies, which even the World Health Organization (WHO) has criticized as excessively harsh.

The Chinese economy experienced a period of rapid economic growth in the decades following its economic liberalization in 1978 and entry into the World Trade Organization in 2001, by some measures surpassing the U.S. to become the largest economy in the world. However, according to reporting from the Financial Times, the Chinese manufacturing sector — a key component of its economy — shrank for the third month in a row in May, and retail sales within the country were down 11% in April. Export growth rates have slowed to levels comparable to those experienced during the height of the COVID-19 pandemic in the summer of 2020. Lockdowns and travel restrictions have wreaked havoc among supply chains, and major manufacturers like Apple have begun moving production out of the country. Some analysts believe US economic growth could outpace China’s for the first time since 1976.

In cities across the country, even those without reported cases, millions of citizens line up for COVID-19 tests daily as negative test results are required to participate in everyday economic life. Conversely, a positive diagnosis can result in eviction to quarantine facilities, and more significant outbreaks can lead to months-long lockdowns. This zero-tolerance policy has led even former admirers of China’s COVID-19 response to criticize the authoritarian nation, as COVID-19 has mutated into less lethal strains, and most of the world has shifted its focus to vaccination efforts.

“The virus is evolving, changing its behavior,” said Dr. Tedros Adhanom Ghebreyesu, director-general of the WHO. “With that… changing your measures will be very important.”

Chinese President Xi Jinping has insisted that China’s approach is “scientific and effective.”

In an official statement responding to the WHO, the Chinese government said, “China’s huge population means that relaxing prevention and control measures will inevitably lead to the death of a large number of elderly people.”

China’s internal restrictions face limited opposition within the country, as its lockdown fatigued population has begun protesting the measures. The Mayor of Dandong, a major city near the border with North Korea, went so far as to apologize for the government’s handling of the situation, although he avoided naming specifics.

Chinese officials are unlikely to reverse the unpopular policies without the go-ahead from senior members of the Communist Party.

“When you are a local government official and you are facing these competing demands, you are going to rank them,” said Yanzhong Huang, a global health expert at the Council on Foreign Relations. “I think any rational local government official will still have more incentives to enthusiastically pursue zero Covid than to take a more flexible approach.”

If official statistics are to be believed, then China has experienced a remarkably low death rate from COVID-19, roughly 3 per million, compared to roughly 1,000 times fewer deaths per million than the US.

Until recently, experts had projected that China would account for roughly one-fifth of all global economic growth until at least 2026, but these estimates have been scaled back.

According to an economic overview released by the World Bank in April 2022, “China is currently experiencing the largest COVID-19 wave since the end of the national lockdown in March 2020. […] Over the medium term, China’s economy is facing structural headwinds given adverse demographics, tepid productivity growth, and the legacies of excessive borrowing and environmental pollution.”

A declining labor force is also a topic of considerable concern. The world’s largest nation of more than 1.4 billion grew by fewer than half a million people in 2021 and is projected to decline in total population for the foreseeable future, a trend that commenters such as Elon Musk have described as ‘population collapse’.

China spent decades encouraging smaller families through various measures such as its infamous one-child policy, but its recent pro-natalist reversal and new three-child policy seem unlikely to reverse the decline. With an aging population and a severe sex imbalance, partly brought on by sex-selective abortions, China will likely face serious internal instability and further population decline in the next few decades.

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